underperforming and overexposed
In a quarterly report described by Chairman Sheila Bair as “pretty dismal”, the Federal Deposit Insurance Corporation revealed that earnings for US banks dropped 86 percent year over year. The FDIC raised the number of banks on its watch list to 117. The Associated Press reports :
“The number of troubled U.S. banks leaped to the highest level in about five years and bank profits plunged by 86 percent in the second quarter, as slumps in the housing and credit markets continued.
Federal Deposit Insurance Corp. data released Tuesday show 117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003.
The FDIC also said that federally-insured banks and savings institutions earned $5 billion in the April-June period, down from $36.8 billion a year earlier. The roughly 8,500 banks and thrifts also set aside a record $50.2 billion to cover losses from soured mortgages and other loans in the second quarter.”
According to CNN, bad loans and failed investments have forced banks to set aside more and more capital to cover losses :
“Facing additional deterioration in the housing market and further weakness in the broader economy, FDIC-insured banks set aside $50.2 billion during the quarter, more than four times the quarterly total of $11.4 billion from a year ago.
At the same time, nonperforming assets and net charge-offs, or loans banks don’t think are collectable, continued to rise, totaling $26.4 billion in the second quarter, almost three times the $8.9 billion during the second quarter of 2007.”
Associated Press : FDIC: troubled banks highest in 5 years; bank profits dropped by 86 percent in second quarter
CNN Money : Problem bank list keeps growing
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